NBFC Registration

Leading the Way in NBFC Registration with Over 75% Market Share

• For lending or investment businesses in India, a valid NBFC license is essential. Our experts guide you through the entire process to ensure a seamless NBFC registration.
• Since 2012, Enterslice has completed 150 out of 200 NBFC registrations in India.
• Setting new milestones with 100% money-back assurance and the lowest ETA in the industry.

An Overview of NBFC Registration

NBFCs (Non-Banking Financial Companies) are primarily engaged in the lending business, dealing with personal loans, business loans, acquisition of shares, finance leasing, hire-purchase, digital lending via apps, and more. NBFC finance has lower compliance requirements compared to banks. NBFCs are legally eligible to facilitate financial activities except issuing cheques, opening bank accounts and accepting deposits.

Any entity venturing into the NBFC business must mandatorily register themselves with the RBI under section 45-IA of the RBI Act, 1934.

This means that every entity involved in lending or investment that meets the principal business criteria as laid down by the RBI must obtain a certificate of registration from the RBI. Additionally, they must maintain a positive net worth of Rs. 10 crores (Rs. 100 million effective 1st October 2022). Any Indian or foreign entity venturing into this business in India must obtain an NBFC license.

Why is Online NBFC Registration Essential?

Any NBFC that intends to start a business in India must register itself in line with the government, legal and regulatory requirements. Online NBFC registration is important to help streamline the process of founding an NBFC in India. Online registration makes the process more efficient and seamless. Online registrations reduce the burden of heavy paperwork, which in turn saves time, facilitating the applicants to complete the process from the comfort of their time and location.

The online NBFC registration process makes it easy for applicants to adhere to compliance and regulatory standards with minimum errors. The online medium offers greater flexibility and transparency and helps applicants keep track of their application status.

Besides, the online registration is in alignment with the Government of India’s digital movement to promote the ease of doing business in the financial sector in India.

NBFC and Bank Difference

NBFCs and traditional banks share many similarities, including lending loans and credit. Yet they are different from each other in the following manner:

1. Priority Sector Lending – Every bank in India must allocate a certain percentage of their lending portfolio to priority sectors. However, NBFCs (Non-Banking Financial Companies) can lend to any sector approved by their board
2. Deposits – Banks are legally eligible to accept deposits. However, NBFCs are not eligible to accept deposits.
3. Regulation – Banks are bound by rigorous regulatory requirements. However, NBFCs are required to comply with flexible regulations in comparison to banks. 
4. Services – Banks provide a wide variety of services such as deposits, withdrawals, loans, credit cards etc. NBFCs are focused on offering loans, asset financing and investment products.
5. Payment Systems – Banks are eligible to participate in payment and settlement systems. NBFCs are not eligible to do the same.

Types of NBFCs in India by Business Activity

As per the role of NBFCs, the types of NBFCs by business activity include:

1. Investment and Credit Company (ICC) – Investment and Credit Company deals with offering financial services such as loans, investments and credits to various entities and individuals.
2. Investment Finance Company (IFC) – Investment and Finance Company deals with investments in infrastructure projects.
3. Core Investment Company (CIC) – The role of a Core Investment Company is to invest chiefly in group companies.
4. Infrastructure Debt Fund (IDF-NBFC) – Infrastructure Debt Fund NBFCs specialize in investing in infra debt.
5. Micro Finance Institution (MFI) – Micro Finance Institutions deal with offering micro-loans to groups and individuals with low income.
6. Factor (Factoring NBFC) – Factoring NBFCs are associated with obtaining receivables from other business entities.
7. Mortgage Guarantee Company (MGC) – Mortgage Guarantee Company is involved in the business of providing services related to mortgage guarantee.
8. Peer to Peer Lending Platform (P2P) – Peer to Peer Lending Platform is mainly involved in the business of lending and borrowing between different individuals through the digital medium where they act as a facilitator.

Types of NBFCs by Regulatory Norms of RBI

According to the role of the NBFC, they are divided into different types as per the regulatory norms. Such types of NBFCs include:  

1. Base Layer NBFC (NBFC-BL) – Base Layer NBFCs are the kind of NBFCs, which are involved in offering financial services to low-income groups, such as loans. These non-deposit NBFCs have assets worth less than 1,000 crores. They are mandated to fulfil compliances on an annual basis.
2. Middle Layer (NBFC – ML) – Middle Layer NBFCs encompass NBFCs, which accept deposits as well as those that do not accept deposits. They are mandated to meet their compliances on a quarterly basis.  
3. Upper Layer (NBFC-UL) – Consists of the top 10 eligible NBFCs identified by the RBI based on asset size. Compliance frequency is monthly.  
4. Top Layer (NBFC – TL) – The Top Layer NBFCs are bound by rigorous regulation and stringent compliances owing to their size and impact on the financial system.

Eligibility Criteria for NBFC Registration

Any business entity seeking NBFC registration must fulfil the below-mentioned eligibility criteria to become qualified to apply for the same:

1. Minimum Net Worth Requirement – The applicant company must have Rs. 10 crore paid-up capital or an equivalent net worth. The capital must be introduced as Tier 1 capital and must not be borrowed capital. 
2. Quality of Management – According to RBI Master Directions and general practices followed by the Department of Non-Banking Regulation of the RBI, at least one-third of the Company's management must have a minimum of 10+ years of banking experience in areas such as credit, risk, or retail operations. 
3. Strong Business Plan – The applicant company must have a clear vision and strong business plan. The business plan should demonstrate how obtaining an NBFC license will benefit the public at large. The RBI grants an NBFC license only if it is reflected in the business plan that the operations will be in the public interest. 
4. Clear Credit History - The applicant company, its directors, shareholders, associate companies, or business concerns where shareholders or directors have interests should not have defaulted on loan repayments and must have a clean credit history with the banks and NBFCs in India and abroad in the case of foreign subsidiaries applying for NBFC registration with the RBI. 
5. Corporate Structure – One of the important eligibility criteria is to register the company under the Companies Act, 2013. The company can be registered either as a private limited company or a public limited company.

Documents Required for NBFC Registration

NBFCs applying for registration in India need to submit the following documents: 

1. KYC of All directors and Shareholders
2. A Detailed write-up about the professional backgrounds of directors and shareholders
3. CA Certified Net worth of directors and shareholders
4. Confidential Banker's reports about the shareholders and directors
5. Experience certificate of employment and business experience of all entities, whether directors were employed in any capacity
6. Highest education certificate copy duly attested
7. Banker report confirming 10 crores Fixed deposit in the bank account of the NBFC company
8. Credit reports of the shareholders and directors
9. Certified MOA & AOA of the applicant company
10. CA Certified Capital Structure of the Company
11. Credit reports of the directors and shareholders
12. Board-approved business plan and financial projections
13. Board approved Credit policy, complete Business SOP and software plan for the proposed operations of the Company

NBFC Registration Benefits

NBFC registration offers various benefits, including consumer interest protection, facilitation of financial services, adherence to compliances, etc. Let us explore the NBFC registration benefits in detail below:

Legal Compliance: NBFCs operate within RBI's legal framework. Since RBI regulates all the NBFCs in India therefore, NBFC structure is considered the second most reputed financial institution after banks.

Credibility: All affairs of NBFCs are regulated by the RBI, which enhances the trust with clients and investors. Because of the value of the NBFC license, you can easily leverage the license in terms of raising low-cost capital for business expansion.

Access to Funding: Easier access to loans and investments. NBFCs get priority in terms of loans by banks against the book of the NBFC. A registered NBFC in India can take debt seven times its net worth. This regulatory relaxation from central banks gives NBFC a greater chance of growth.

Business Expansion: Opportunity to diversify financial services across fields such as lending, investments, assets financing, supporting BNPL products, selling financial products, stock brokering, merchant banking, applying for IRDAI corporate agent license, etc. One single NBFC company can offer multiple financial solutions. It is one of the significant benefits of NBFC registration.

Market Opportunities: A registered NBFC has the opportunity to capitalize the ever-growing financial industry by operating its business legally in India.

Fintech Collaboration – A registered NBFC becomes eligible to collaborate with fintech companies to stimulate its growth and restructure its operational capabilities to boost its overall ROI.

Investment in NBFCs: A Magnet for Foreign Investors

Investment in NBFCs is a highly attractive undertaking for foreign investors, venture capitalists, and high-net-worth individuals (HNIs). The regulations set by RBI earn investors' confidence in an NBFC, significantly reducing the risk of loss compared to other non-regulated entities in the financial sector.

Additionally, NBFCs can legally attract 100% Foreign Direct Investment (FDI). However, they must obtain a six-pointer KYC from investors and comply with FEMA reporting requirements.

NBFC Registration Process: A Step-by-Step Guide

An NBFC registration process takes up to 180 working days to complete. However, if the process is not followed or if there are any discrepancies in the application and documentation stages, the process can get delayed significantly. Let us explore the step-by-step guide to the NBFC registration process below:

1. Mandatory Company Registration

Register your Company under the Companies Act, 2013 (or earlier acts) and obtain a Certificate of Incorporation (COI) from the Registrar of Companies.

Ensure you have the required Rs. 10 crores paid-up capital.

2. Draft and Submit the NBFC Business Plan

Prepare a comprehensive 5-year business plan outlining objectives, executive summary, market analysis, HR plan, financial projections, and risk management framework.

3. Examination Process

Consultants will collect all documents from promoters and shareholders, ensuring the quality of capital and management meet the criteria laid down by the RBI before applying.

4. Application for NBFC Registration

• Apply for online NBFC registration through the RBI's official website. 
• Download and fill out the e-form and application reference number provided. 

5. Prepare and File Documents

Arrange all necessary documents and physically submit them to the RBI's Central office for verification and authentication.

6. Issue of Registration Certificate

Upon successful verification by the regional and central offices, the RBI will issue the Certificate of Registration within 180 working days, provided all requirements under Section 45-IA are met.

By following these steps, you can ensure a smooth NBFC registration process and secure your NBFC license efficiently.

NBFC Registration Fees

Are you aware of the NBFC registration fees in the flourishing Indian economy? Well, NBFC registration fees depend on various factors, including the following:

• ROC Fees for 10 crores Capital: The Registrar of Companies (ROC) fees may range from Rs. 15 lakhs to Rs. 20 lakhs, depending on the state where you choose to register the office.
• Consulting Fees: Fees for NBFC registration consultants depend on the expertise of the consulting organization, years of experience, team size, composition of the team, and past success.
• Miscellaneous Expenses: NBFC registration may involve travelling and other filing expenses ranging anywhere between Rs. 50,000 to Rs. 100,000.

NBFC Registration Pre-Requisites

Background of the Shareholders—In 90% of cases, the RBI returns or rejects NBFC registration applications owing to inadequate documents related to the promoters' backgrounds. Sometimes, the wrong justification for filing the NBFC application also causes delays.

Outlining the promoters' backgrounds with clarity helps save time and helps the Company obtain the NBFC license on time.

Capital Evaluation – The RBI thoroughly investigates the quality of the capital introduced by shareholders before granting the Certificate of Registration (COR). Shareholders must introduce tax-paid income. Any funds introduced that do not comply with Indian and international laws can result in the rejection of the application.

Composition of Team – The applicant company's team must meet the "fit and proper" criteria necessary for operating a financial business. Ensuring that their team’s credentials and experience align with RBI requirements is essential.

Operational Area – Many small cities in the country lack essential banking services. High-priority areas will be addressed promptly. Establishing an NBFC in Tier-2, Tier-3, or Tier-4 cities can streamline the licensing process, often resulting in a faster registration timeline compared to metro cities.

Targeting the Untouched Sector –Newly registered NBFCs must focus on serving segments of the population that cannot access loan facilities due to poor credit ratings or insufficient documentation. Implementing a robust risk management strategy is essential to mitigate potential risks and ensure the stability of operations.

Typical Timeline for NBFC Registration

Most NBFC loan companies have successfully obtained their NBFC registration within 180 working days, with some taking less than 90 days. However, this timeline can vary based on the submission date, shareholder composition, and presence of FDI, which may delay the process.

The following timeline is based on our 12 years of experience and does not guarantee regulatory timelines: 

1. Company Formation: 15 days
2. Bank Account Opening: 07 days
3. Business Plan Preparation: 15 days
4. Capital Infusion and Document Collection: 15 days
5. Acceptance of Application for COR by RBI: 30 days
6. First Response from RBI after Application Scrutiny: 30 days
7. First Stage Clearance from RBI: 07 days
8. Due Diligence Process: 30 days
9. Communication to Regional Office about Final Decision: 07 days

By following this timeline, you can better manage the process and expectations for obtaining your NBFC license.